Bitcoin faces pressure as the "Doppler effect" signal from Japan's monetary policy spreads globally

This week’s trading volume remains within control as analysts focus on the two-day policy meeting of the Bank of Japan ending on Friday. The market is awaiting a second interest rate hike this year, a move that could create a “Doppler effect” across the entire global cryptocurrency market.

Bitcoin Price and Current Market Signals

As of now, Bitcoin (BTC) is trading around $90.22K, reflecting a 3.27% decrease in 24 hours. Compared to the peak of $126.08K recorded in October, the price has fallen more than 28%. However, data indicates volatility continues, reflecting concerns over upcoming macroeconomic factors.

The “Doppler Effect” Mechanism in Yen Arbitrage Trading

The Bank of Japan shifting towards higher interest rates will break the long-standing arbitrage model. Over the past decade, traders have exploited the interest rate differential—borrowing yen at near 0% interest and investing in higher-yielding USD assets or cryptocurrencies. This strategy acts like a continuous sound wave (Doppler effect) driving capital into risky assets.

According to Zhang Lin, head of LBank Labs, this new policy move “quietly ends an era of arbitrage trading—the process of draining liquidity gaps that have long lubricated the entire global risk asset market, shifting capital from abundant to scarce.” He explains that this situation “signals the US dollar will strengthen, stock markets will be volatile, and cryptocurrencies will weaken.”

While this shift may open new arbitrage opportunities between major assets, Zhang Lin notes these “rarely appear when economic fundamentals change.” Instead, the broader impact is a restraint on overall speculative momentum. “Rising interest rates will limit speculative behavior; in a fiat currency shortage, Bitcoin’s scarcity will overshadow other cryptocurrencies,” Zhang Lin comments.

Contradictions in the Global Macroeconomic Context

However, the global picture is more complex than it appears. Matt Hougan, Chief Investment Officer at Bitwise, points out that “the macro environment for cryptocurrencies is undergoing extremely complex and conflicting changes.”

He describes: “Japan tightening monetary policy (disadvantageous for cryptocurrencies), while the US is easing (favorable for cryptocurrencies). The Federal Reserve is buying Treasury bonds, while Europe is in stagnation.” These forces “will ultimately cancel each other out,” Hougan believes, “so macroeconomic variables are not the key to long-term crypto profits through 2026.”

However, in the short term, Hougan warns volatility will continue: “The market will oscillate between excitement (Fed lowering interest rates!) and panic (closing arbitrage positions), increasing fluctuations.”

Short-term Forecast and Risks

Data from trading platforms shows a 66% probability that Bitcoin will test the $100,000 mark, down from 72% last week (72%), reflecting investor caution despite relatively optimistic prospects.

Hougan believes “the market has priced in the rate hike, so this factor is already reflected in the price.” However, he warns: “Nevertheless, the fact that Japan’s interest rates hit a 30-year high remains a noteworthy headline! Investors may react negatively, exerting short-term downward pressure.”

Due to low liquidity, especially ahead of upcoming holidays, Bitcoin and the broader crypto market remain vulnerable. Sporadic volatility could be amplified, even triggering large-scale liquidation events by the end of the year.

Global capital flows will depend on the next direction of interest rates from the Bank of Japan, as well as the pace of unwinding yen-funded arbitrage trades—these factors will continue to be focal points for crypto traders in the coming weeks.